Palm oil sustainability

Palm oil supply chains

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Palm oil is the world’s largest source of vegetable oil and comes from trees that grow within 10 degrees of the Equator.

The trees have reddish fruit that grows in bunches weighing 20 kilograms on average and takes five to six months to develop from pollination to maturity. Within each fruit is a single seed, the palm kernel, surrounded by an oily pulp. Both the pulp and the kernel yield palm oil when crushed. Palm is the highest-yielding oilseed crop, requiring less than half of the land needed by other crops to produce the equivalent amount of vegetable oil.

Palm oil and palm kernel oil are consumed as food and used in industrial applications ranging from soap and cosmetics to biofuels. Millions of people around the world depend on palm oil for their livelihoods, and for hundreds of millions more it makes up a core part of their diets. Its texture, long shelf life and performance at high temperatures make palm oil a desired cooking oil and an alternative for margarine, shortening, ghee, frying fat and cocoa butter. Palm kernel oil is used as an ingredient in confectionary and coating fats.

Strong demand for palm oil worldwide has resulted in expansion of smallholder farms and plantations, raising environmental and social concerns, including forest and habitat loss, peat land conversion, pollution and greenhouse gas emissions, and the rights of indigenous communities. Unsustainable practices by some suppliers have resulted in deforestation and negative impacts on biodiversity; cultivation of land without consideration for the rights of indigenous communities; and poor working conditions and violation of workers’ rights. Cooperative efforts to address these issues and move the industry toward greater sustainability are underway involving major palm oil producers, processors, traders, non-governmental organizations (NGOs), workers, smallholders, local communities and government agencies.

Where we operate

Cargill owns and operates four palm plantations in Indonesia: PT Hindoli in South Sumatra; and PT Harapan Sawit Lestari, PT Indo Sawait Kekal and Poliplant in West Kalimantan. We operate 12 palm oil refineries in Malaysia, India, China, the U.S. and the European Union that purchase, refine and market palm oil products from our own and other plantations. We also purchase sustainable palm oil from independent smallholder farmers in Indonesia and Malaysia. As a trader of major commodities around the globe, we also are active in palm oil trading markets.

How we improve the sustainability of palm oil supply chains

For more than 10 years, Cargill has taken significant steps to improve the sustainability of the palm oil industry throughout Indonesia and Malaysia – both on our own plantations and on those of third-party suppliers and the smallholders we support. We were an early member of the Roundtable on Sustainable Palm Oil (RSPO) in 2004. In July 2014, Cargill introduced an updated palm oil policy, detailed below, committing to sustainable, deforestation-free, socially responsible palm oil. In the same period, we joined The Forest Trust (TFT), a non-profit organization that helps companies deliver products responsibly. TFT will support our supply chain mapping and the implementation of our new palm oil policy. Cargill also signed the Indonesian Palm Oil pledge at the 2014 U.N. Climate Summit. These actions build on prior commitments and help us move toward our goal of 100 percent responsibly produced palm oil.

Cargill’s palm oil policy

Cargill will build a traceable palm oil supply chain and is firmly committed to: no deforestation of high conservation value (HCV) lands or high carbon stock (HCS) areas; no development on peat; no exploitation of rights of workers, indigenous peoples and local communities; and inclusion of smallholders. Cargill is working to ensure that all palm products we produce, trade or process are in line with these commitments. We are collaborating with customers, suppliers, governments, NGOs and other stakeholders to achieve these goals. View Cargill's policy on sustainable palm oil.

Increasing traceability and transparency

To build traceability and improve sustainability, TFT helped us map the full palm oil supply chain for our own Malaysian refineries to the mill level. We completed this mapping for our Port Klang and Kuantan refineries in 2014, allowing us to offer customers traceable palm oil from these facilities. We continue to map third-party suppliers in Indonesia and Malaysia to meet our goal of 100 percent traceability to the mill by the end of 2015. The mapping process includes using satellite imaging to identify potential environmental and social risks in each mill’s draw area and engage those suppliers. Risk indicators include forest cover loss, peat, proximity to protected areas, fire alerts and certification status. We are piloting the use of unmanned aerial vehicles and solar-powered, satellite-connected remote sensor networks to monitor land use in Indonesia. We also are developing indicators for labor and land rights. Where high-risk areas are identified, we plan to carry out on-the-ground field assessments in partnership with TFT and other experienced NGOs. If necessary, we will work with suppliers to develop individual action plans and improve responsible supply chain practices. We have committed to report our actions publically on a regular basis.

Reducing our environmental impact

We reduce the environmental impact of palm oil production by conserving HCV and HCS lands, minimizing encroachment on habitats and ecosystems, reducing greenhouse gas emissions, and protecting water quality. In partnership with TFT, Cargill conducted a study to identify HCS forests near our PT Hindoli plantation, successfully using methodology developed by TFT and Greenpeace. The HCS study helped determine which areas are appropriate for development and which lands must be conserved to support ecosystems. We have contracted with the independent consulting firms Daemeter and Solidaridad to assess and develop corrective action plans for our newly acquired operations at Poliplant. Daemeter’s review of social and environmental factors will include field assessments to identify HCV and HCS areas. Solidaridad will advise us on smallholder engagement.

To protect air quality, we reinforced our long-standing zero-burning policy in September 2014 by joining other plantation owners in South Sumatra, Indonesia, in signing a declaration to support the prevention of land and plantation fires, helping to fight haze in the region. We help maintain the health of watersheds by monitoring and treating all wastewater from our operations.

Supporting smallholder farmers

Oil palm smallholders – local landowners who grow palm oil on small farms in Indonesia – are a significant contributor to the success of our plantations. We assist them in developing sustainable land use and agronomic practices, including helping them develop their fallow land into income-generating palm estates. The smallholder program at our PT Hindoli plantation, for example, works directly with thousands of farmers to help them increase yields, improve incomes and raise their standards of living. Our investments are enhancing agricultural production, developing infrastructure and supporting education, healthcare and the community’s other economic and social needs.

We want to ensure that smallholders have a market for their crops. Therefore, we accept smallholder fresh fruit bunches at our mills ahead of even our own company crop. We also work with smallholder cooperatives to build their monetary reserves so they have sufficient savings for the period following replanting, when they incur a loss of income for 48 months while waiting for new trees to bear fruit. Our efforts are aimed at helping smallholders reap the added value that comes with being responsible stakeholders in the supply chain.

Increasing certification

We advance certification projects to increase sustainability across our own plantations, adjacent smallholder land, and independent mills and smallholders. In 2009, Cargill’s PT Hindoli plantation was one of the first plantations to be RSPO certified. Since that time we have made continuous improvements in advancing certification to cover 100 percent of Cargill’s plantation and adjacent smallholder land and in attaining certification under the International Sustainability and Carbon Certification (ISCC) scheme, which provides a framework for measuring greenhouse gas reductions. Hindoli received the industry’s first Indonesia Sustainable Palm Oil (ISPO) certification in 2013. Our PT Harapan Sawit Lestari plantation received ISCC certification in 2013 and RSPO certification in 2014, including smallholder farmers. Since July 2013, we have worked with the NGOs Solidaridad and Wild Asia to assist independent mills and smallholders in achieving RSPO certification in Malaysia.

Encouraging responsible labor practices

We do not tolerate the use of illegal, abusive or forced labor in any of our operations anywhere in the world, and we abide by all of the laws in the countries where we operate. In Indonesia, we adhere to national laws that require those working on farms to be at least 15 years old. We also aim to exert a positive influence on labor practices on plantations owned by our suppliers. We believe it is essential that all members of the supply chain work together with governments, local communities and NGOs to find practical solutions to labor issues while fostering responsible economic development. We are committed to doing our part to ensure fair labor practices across the supply chains we touch, and we support the work being done by governments and organizations like the RSPO, the International Labor Organization and the United Nations Children’s Fund to address these issues.